A project under consideration has a net present value of $10,000 for a required investment of $60,000. There are no other investment options at this time. However, the assumed discount rate used to calculate the net present value is 20%.
On the basis of this information alone, this project should:
Definitely be rejected because $10,000 is only 17% of $60,000
Be rejected on the basis that the project loses $50,000
Probably be approved since the net present value is greater than zero
Be accepted if the cost of capital is greater than or equal to 20 percent